US Dollar Forecast: Fed Rate Cut Bets Cap Gains, Trade Optimism Lifts Sentiment – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY) hovered near 99.60 during Friday’s Asian session, showing limited movement despite hawkish remarks from Federal Reserve Chair Jerome Powell. The Greenback’s stability reflects rising expectations of a December rate cut, which are offsetting the Fed’s cautious tone.

According to the CME FedWatch Tool, traders now see a 71% chance of a rate cut in December, up from 66% a day earlier but down from 91% last week. Powell noted that policymakers may need to wait for updated economic data before adjusting policy, as the ongoing US government shutdown has disrupted official reporting.

Fed’s Split Decision Signals Uncertainty Ahead

The Fed voted 10–2 to lower its benchmark rate by 25 basis points to a 3.75%–4.0% range. The decision exposed internal division—Governor Stephen Miran favored a 50 bps cut, while Kansas City Fed President Jeffrey Schmid preferred no change.

Powell emphasized the central bank’s ongoing challenge of balancing inflation control with employment support.

Trade Optimism Offers Mild Support

Talks between Presidents Trump and Xi ended with the US agreeing to reduce tariffs on Chinese goods to 47% from 57%, while China pledged to limit fentanyl exports, boost US soybean purchases, and ease rare earth restrictions, moves that may offer short-term relief to market sentiment.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is trading near 99.61, extending its rebound after breaking above a key descending trendline at 99.35. The breakout confirms a short-term bullish bias, supported by the 50-EMA crossing above the 200-EMA — a signal often seen as a momentum shift toward buyers.

On the 4-hour chart, DXY has formed a series of higher lows, reflecting improving sentiment as traders scale back rate-cut expectations following the Fed’s latest move. The RSI at 71 shows overbought conditions, suggesting that a brief consolidation or pullback toward 99.35–98.90 could occur before further gains.

If momentum sustains, the next upside target sits near 100.23, followed by 100.63, where previous resistance aligns with the broader trendline structure.

GBP/USD Technical Analysis

The GBP/USD pair is trading near $1.3133, extending its decline after breaking below key support at $1.3163. The bearish momentum remains intact as price holds below both the 50-EMA ($1.3273) and 200-EMA ($1.3377), confirming sustained downside pressure.

The RSI at 30 signals oversold conditions, hinting at a potential short-term rebound, though sentiment stays weak amid broad dollar strength. Immediate support lies near $1.3080 and $1.3023, while resistance is capped at $1.3163 and $1.3246.

A decisive close below $1.3080 would expose $1.2965, whereas recovery above $1.3246 could signal a short-covering rally. Overall, bears remain in control heading into early November.

EUR/USD Technical Forecast

The EUR/USD pair is trading near $1.1558, hovering close to the lower boundary of its descending channel. Price action remains weak below both the 50-EMA ($1.1618) and 200-EMA ($1.1653), signaling persistent bearish pressure.

The pair has repeatedly failed to break above the descending trendline near $1.1620, reinforcing the downtrend structure. The RSI at 37 points to mild oversold conditions, suggesting limited room for further downside before a potential short-term rebound.

A clear break below $1.1545 could expose the next support at $1.1510 and $1.1477, while a rebound above $1.1620 would indicate early signs of recovery toward $1.1669.